Northgate IS issues suppliers with Ts&Cs change ultimatum

Public sector giant demanding supplier rebates based on turnover as it rationalises distie base

Northgate Information Solutions (NIS) is sharpening up its axe act on procurement in a move that has gone down very badly with some suppliers.

The IT giant has written to disties and vendors with a take it leave it offer - pay a nine per cent rebate based on volume of trade with NIS each year - the first instalment is backdated to the start of 2011 - or lose NIS as a customer.

Negotiating new Ts&Cs is not new - most suppliers do it every year - but coming against a backdrop of flatlining wholesaler revenues in EMEA, the tone of the letter sent early this month has ruffled more than a few feathers.

NIS, on behalf of its subsidiaries - Northgate Arinso, Northgate Managed Services and Northgate Public Services - stated in the missive it has completed a "comprehensive review of our procurement practises".

"As a result, we have elevated the focus on procurement within our organisation globally and established a new framework for engaging with our suppliers going forward," said Dhruv Parekh, chief transformation officer at NIS, in the letter seen by The Channel.

The carrot for the network of suppliers is that NIS plans to cut their numbers in half - from around 30 to 15 - so it will theoretically funnel more business to those that remain on board.

"This is a unique but challenging opportunity for our suppliers, as those with the most competitive rates, terms and conditions, and who show the commitment to support us will be able to substantially increase their business," said NIS.

Now for the stick: NIS has demanded a nine per cent rebate on the turnover "generated from all Northgate entities".

"This rebate will based based on spend from January 1st 2011 to 31st December 2011. For this initial period, NIS will raise an invoice in respect of this rebate. For subsequent cycles, we propose to execute a yearly rebate in January of every year for the prior 12 months spend," Dhruv added in the letter.

The missive added that suppliers must also agree to Northgate's standard payment terms of 60 days after receipt of an invoice.

"Your adherence to these criteria will allow us to confirm your position in our supplier consolidation programme going forward," Dhruv added.

Suppliers have until 19 October to agree the new Ts&Cs, but some are clearly feeling aggrieved with one telling The Channel the move was not helpful in the current climate, and likening it to blackmail.